MINUTES SENATE FINANCE COMMITTEE February 29, 2000 9:02 AM TAPES SFC-00 # 40, Side A and Side B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 9:02 AM. PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell, Senator Al Adams, Senator Dave Donley, Senator Lyda Green, Senator Loren Leman, Senator Randy Phillips and Senator Gary Wilken. Also Attending: DARWIN PETERSON, Senate Finance Committee Aide and staff to Co-Chair Torgerson; JIM POUND, Aide to Senator Taylor; BOB LOEFFLER, Director, Division of Mining, Land and Water, Department of Natural Resources; JULIE LUCKY, Staff to the Senate Resources Committee Attending via Teleconference: From Wrangell: DAVID SNEED; From Anchorage: STEVE BORELL, Executive Director, Alaska Miners Association, Inc. SUMMARY INFORMATION SB 6-DISPOSALS OF STATE LAND The Committee adopted a committee substitute as a working draft, heard from the sponsor, the Department of Natural Resources and members of the public. The bill was held. SB 175-STATE MINING LAW The Committee heard from the sponsor, the Department of Natural Resources and the Alaska Miner's Association. The bill reported from Committee with no changes. SENATE BILL NO. 6 "An Act relating to the disposal of state land." This was the fifth hearing of this bill in the Senate Finance Committee. Co-Chair Torgerson directed the member's attention to a message from the Division of Mining, Land and Water[Copy on file] that gave an estimate of what it would cost to implement the program dependant upon how many acres the legislation requires. He noted that a proposed committee substitute before the members stipulates 75,000 acres of land for disposal, which would cost $10 million according to the division's estimates. DARWIN PETERSON, Senate Finance Committee Aide and staff to Co-Chair Torgerson explained the proposed committee substitute, 1-LS0071\S. Title - sets mandatory amounts of land to be offered for disposal in the land bank at 75,000 acres annually Section 1 - remains the same as the previous version Section 2 - creates a Land Disposal Advisory Committee that closely resembles the Alaska Minerals Commission. This committee will accept public nominations for land to be deposited into the land bank and can also include their own recommendations. Co-Chair Torgerson clarified that the committee that would have been established under the original version of the bill was not an advisory committee. Mr. Peterson noted that the advisory committee language was inserted at the recommendation of the Department of Natural Resources because it was felt that a non-advisory committee would put too much constraint upon the department. Co-Chair Torgerson asked about legal concerns associated with the non-advisory committee. Mr. Peterson explained that there was a "separation of powers" issue. Section 3 - states that the department must keep at least 75,000 acres of land in the land disposal bank Section 4 - requires the department to prepare a five- year land disposal plan that would be compiled by reviewing recommendations of the Land Disposal Advisory Committee along with the department's recommendations Section 5 - includes the advisory committee as an entity that can nominate land for deposit or withdrawal from the land disposal bank Section 6 - relates to the new appraisal and survey detailed in Section 9 Section 7 - directs the commissioner to keep an inventory of land in the land disposal bank Section 8 - identifies sections in statute that do not apply to the bank Section 9 - allows the commissioner to charge the purchaser up front or by reimbursement, for the appraisal and survey of land Senator Adams asked how the 75,000 acres figure was reached and suggested requiring 50,000 at the onset of the program and then gradually increase the amount to 75,000. He thought the lower initial amount would allow the new advisory committee to become established before trying to deal with great amounts of land. Mr. Peterson responded that the chair had looked at three scenarios presented by the department and chose the most cost effective. Co-Chair Torgerson added that it would cost $35 million to dispose of 150,000 acres. He spoke of discussions he had with the department about charging buyers for the up-front costs of appraisals. He learned that could not be done and therefore, there would be a one-time cost to start up the program. Co-Chair Torgerson stressed that it was still his intent to turn this legislation into an appropriations bill. He planned to wait until all other debate regarding the bill was completed before drafting appropriation language. Senator Phillips asked about the criteria given to the commissioner in Section 9. "The commissioner may require a purchaser of land, whether the purchase is by auction, lottery, or other means, to provide, at the purchaser's expense, an appraisal or survey of the land, or both, completed in the manner directed by the commissioner." He felt the language gave too much leeway to the department. Mr. Peterson suggested changing "may" to "shall" saying that the intent is to direct the department to save as much money as possible without imposing too much constraint. Senator Green asked if it would sometimes be more efficient and cheaper for the department to do the surveys and appraisals. She gave an example of a large area that was to be subdivided, surmising that it would be more prudent to do the surveys for the entire parcel all at one time. Co-Chair Torgerson said that was probably true and that a representative of the department would explain later in the meeting. He added that the money spent on these surveys and appraisals should still be recovered when possible. Mr. Peterson directed attention to the permanent fund dividend eligibility requirements stating that these are more restrictive than simply being a resident of the state. To become a resident of Alaska, an individual only has to register to vote and state intent to stay in the state. Mr. Peterson then spoke of conflicts the previous bill versions had with other statutes with regard to stipulations of who could purchase land under the proposed program. He said that to limit land sales to only those who qualify for a permanent fund dividend conflicted with other land sale procedures within the department that only require Alaskan residency. JIM POUND, Aide to Senator Taylor spoke to the original version of the bill and was unsure if the committee substitute addressed the 50,000 acres that was sold but then had ownership reverted back to the state. Co-Chair Torgerson referred to the before-mentioned information provided by the department and detailed that the 75,000 acres included the 50,000 acres available for re- offer. He stressed that this bill only includes 25,000 new acres and this was because of the high cost to offer any new land. Co-Chair Torgerson spoke of the problem with charging the buyer up front for the appraisal and survey costs and therefore keeping expenditures down. Mr. Pound related to a question from a constituent regarding who would perform the surveys and appraisals. The constituent had suggested a process for the division to approve an appraiser or survey that would eliminate arguments between the buyer and the state. The point was also made that it would be less expensive to have the state perform all surveys and appraisals in a remote area at one time rather than require each buyer to individually arrange for the services. Co-Chair Torgerson had made note of the question and said he would ask the department to respond. BOB LOEFFLER, Director, Division of Mining, Land and Water, Department of Natural Resources, made the statement that many Alaskans considered the sale of private land as one of the basic responsibilities of the state. In recent months, he said, there had been discussion on the need to increase the rate of land sales. He qualified that at the same time, the state's budget situation resulted in the need to find methods of selling land that require less administrative costs to the state. However, he stressed that the program requires an appropriation because, although selling land makes money, it also costs money. Mr. Loeffler stated that the overall organization of the bill was good, but qualified that there were some small problems that stood in the way of a successful program. He pointed out that Section 8, for example eliminated the entire statutory framework for the department. Section 8 stipulated that the commissioner shall annually submit to the governor an appropriation request for funding necessary for survey of land to be offered for disposal, preliminary feasibility studies, engineering design work, right-of-way acquisition, construction of necessary capital improvements and identification of land for future disposal. He detailed that it eliminated the commissioner, the Division of Mining, Land and Water and the department's ability to adopt regulations, do public notice, perform auction sale procedures, dispose by lottery, sell agricultural land, reject bids, enter into contracts, give veteran's preference and give agricultural preference. Co-Chair Parnell did not understand how Section 8 eliminated the abilities of the department. He noted that, "the provisions of AS 38.05.005-38.05.037, 38.05.045-38.05.069, and 38.05.600 do not apply to the land disposal bank, except as specified in AS 38.04." He stated that this language did not eliminate the department's ability to perform the above functions and was not as "all sweeping" as the witness feared. Mr. Loeffler went on to describe his second concern, which was stipulating a specific amount of land for disposal. He said the reason for his concern was that, "quite frankly, selling land costs some money" and without an adequate appropriation, the department would not sell the stipulated amount of land. Setting an amount in statute, he explained would create an expectation that future legislatures might not allow the department to fulfill. Mr. Loeffler then spoke about a timing problem within the legislation, explaining that once an appropriation is received, it takes one to two years before the land is put on the market, depending on whether a survey is required. Therefore, he cautioned if the appropriation is given this year, the land would not be available for sale until FY 02 and FY 03 regardless of any statutory requirement to sell land this summer. Mr. Loeffler next addressed his final concern saying he did not understand the interaction between the advisory committee and the legislature. He questioned the process where the advisory committee would submit nominations of land for disposal to the legislature and allowing the legislature to amend how the department offers parcels. He suggested this procedure "put the legislature in the position of making decisions that are more appropriate for the administrative branch." He spoke of the best interest findings and whether the land would be used for commercial, industrial or residential purposes, which he believed that the legislature should not be directly involved in. He stressed that the department currently offers the land for sale and with some exceptions, lets the buyer determine how the land would be used. Senator Phillips asked if the bill stipulated 75,000 acres, would the general fund cost to implement the program be $9.4 million. Co-Chair Torgerson affirmed the department's fiscal note would reflect that amount if the Committee adopted a 75,000-acre provision. Senator Phillips then asked if there would be any attempt by the state to recover any of this money from the buyers. Mr. Loeffler replied, "I believe that selling land makes money". He qualified that there would be a delay before the costs were recovered, but that eventually the state would get the money back. Co-Chair Parnell suggested that the fiscal note should therefore reflect the revenues in future years, as well as the initial startup expenditures. Co-Chair Parnell addressed the witness's concern about the legislature's ability to have a say in the classification and categorization of parcels. While he understood those concerns, he did not think the matter would be as contentious as feared. He gave an example of the Alaska Board of Fisheries that makes salmon allocations and noted that the legislature seldom gets involved. Even when the legislature does get involved, he assured that a majority vote is required to override the board's decisions. He thought it would be prudent to retain some ability for the legislature to change the list of selected land to be offered pointing out that he did not want the legislature to be involved every year. Co-Chair Torgerson referred to Mr. Loeffler's comment that the department does not classify the land as residential, industrial or commercial but only classified homesteading and agricultural land. Mr. Loeffler explained that the department offers partials under the statutory framework set by the legislature, which were lottery, agriculture and homestead. Those are the only choices, he said. Co-Chair Torgerson thought if the department offered land in an area already zoned for particular uses the buyer could not use the land for purposes other than what it was zoned for. Therefore, he agreed with Co-Chair Parnell that the legislature's involvement in the classification would be a smaller matter than the witness thought. Co-Chair Torgerson said he also agreed that the legislature should not become too involved, but thought the ability to participate should not be precluded. Senator Phillips directed the Committee's attention to Section 9 of the committee substitute that addressed appraisals and surveys. He asked the division's recommendation of the language "may" versus "shall". Mr. Loeffler answered that either word would be fine with him. Except for the homestead program, he said the buyers all reimburse the appraisal and survey cost through the sale price of the land. Senator Phillips had a philosophical problem with the state fronting the money for the survey and appraisal costs. He expressed, "If person is really serious about obtaining land from the state, he would be paying for the appraisal and the survey itself first before getting title to the property." He thought there was too much exposure when the state paid the costs up front. Mr. Loeffler responded that the department had 5,000 parcels that had been offered before and were already surveyed. He stated that many parcels are returned to the state and that those parcels are already surveyed. Reselling these parcels, he said would recover the earlier survey costs. He added that the "Stake it Yourself" program is hard to administer and that pre-survey is the most efficient way to operate the program. He also noted that some planning authorities require a pre-survey in areas near roads. Senator Phillips wanted to know how long the state has had the 5,000 parcels and whether it has cost the state money. Mr. Loeffler answered the land has been returned to the state since the early 1980s and that the money was already spent on surveys and appraisals for that property. Senator Phillips made the statement that he believed the users of any state program should at the very least pay those services. He continued asking the total cost of the land disposal program and how much land has been disposed and how much returned to the state. Mr. Loeffler stressed that in order for the program to generate revenue, the default rate must be brought down from the current 40-50 percent. He stated that repossessing land is an expensive process. He said the reason for the high default rate was because the buyers are required to pay a down payment of only five-percent and a yearly payment of only $100 over 20 years. He stressed that because the buyers have so little of their own money invested in the land, the land is easier to "walk away from". He noted that the committee substitute requires buyers to pay the appraisal and survey costs at the time of purchase, which would increase their commitment to the property. Co-Chair Torgerson recognized Senator Phillips's concern about the default rate. However, he also had heard that the state's unsold land is "garbage land" and that the good land was already sold. He explained his attempt to offset these problems by requiring the department to develop a five-year schedule of what land would be sold. He hoped people interested in buying certain land could nominate that land to be offered for sale. He said this process was similar to the one used for oil and gas development. Co-Chair Torgerson commented on the program receipts noting that the program would not generate new revenue for a few years until the land is surveyed. He pointed out that the in the previous year, the department brought in more money than it expended. While he predicted the same could happen this year, he said he made the judgement call to instead spend funds to identify the value of land that could be offered. He stated that he wanted to know the value of the land known because he was unsure if anyone would be interested in purchasing the land that had little value, even with the five-percent down payment program. Co-Chair Torgerson reminded the Committee of the 1986 economic crash in the state. He noted that the state repossessed a great deal of land during that time. Senator Phillips asked if the crash was the primary reason for the defaulted loans. Mr. Loeffler answered that while there were many parcels repossessed during that time, the situation remains that those properties with an outstanding balance above 90 percent have a 40 percent default rate. Co-Chair Torgerson clarified that the land offered as subdivisions required the survey work to be done up front at the state's initial expense, but the surveys on remote parcels could be performed at the buyers up front expense. Mr. Loeffler noted that the projected cost estimates shown on the handout assumes that purchaser pays the survey and appraisal costs and that the expenses do not go through the state budget. Mr. Loeffler broke down the cost of land disposal to $250 per acre. He said that money covers the cost of identifying areas suitable for sale and the title searches. He noted that the title searches for these lands are different than most title searches because all the records are contained within the Department of Natural Resources. He continued detailing the funds also include selecting state interest areas, such as existing trails, critical habitat, etc., within a disposal area. Furthermore, he said the funds cover the best interest finding process, advertising available land, addressing inquiries, conducting the lottery in lottery sales, then reviewing the appraisal and survey and finally, contracting the administration of the actual sale. Mr. Loeffler predicted that the proposed land disposal process would be significantly cheaper. Co-Chair Torgerson how many new employees would be needed for the program. Mr. Loeffler was not sure. Co-Chair Torgerson hoped the Committee would adopt the proposed committee substitute and then get more info from the department on the expected revenue, the number of new employees along with a breakdown of expenditures. And how much paid for by the buyer. Senator Phillips moved for adoption of CS SB 6 Version "S" as a Workdraft. Senator Adams commented that he would not object to the motion but noted a policy question on whether the legislature should be micro-involved in land disposal. He did not agree that the legislature should be involved. Co-Chair Torgerson answered another of Senator Adams's concerns saying that a land bank already exists and that this legislation would only require the department maintain a balance of 75,000 acres available for sale. There was no objection and the Committee ADOPTED Version "S" as a Workdraft. Senator Phillips revisited the issue of inclusion of "shall" or "may" in Section 9. He understood that there might be some exceptions to the rule that the commissioner must recover all costs, but wanted the language to be "shall" with an allowable exception detailed. Mr. Loeffler thought "shall" was acceptable so long as exceptions were allowed for certain cases. He stated that the department would only do the appraisal before offering the land for sale if there was a good reason, such as areas where a Stake it Yourself program would not work. Co-Chair Torgerson understood and stressed that the reason the language currently read "may" was because it would be too difficult to incorporate the intent into statute. Mr. Loeffler said he was willing to try to draft appropriate language. Senator Phillips commented that if the details could be worked out, he would be comfortable with exception language. Senator Wilken referred to page two line seven, which addressed the advisory committee. He asked if the members were subject to review or had term lengths. Co-Chair Torgerson replied that the governor changes every four or eight years and the President of the Senate and the Speaker of the House of Representatives potentially change every two years. Therefore, he surmised the advisory committee appointments would be reviewed with each leadership change. He qualified that the governing language was taken from the Mineral Commission but that it could be amended to incorporate a term limit. Senator Wilken recommended the seats have five-year terms. Senator Wilken then commented that the legislation assumes the department will sell enough land to cover the operating costs of the program. He asked if the purpose of the program was to sell enough land to break even or to make money and if revenues were generated, where would the money go. He restated his question asking if the focus was to sell 75,000 acres annually or to maximize revenue. He suggested that it might at some time be prudent to delay land sales to maximize the return. Co-Chair Torgerson responded that the intent of the legislation was that the program receipts would maintain an annual disposal of 75,000 acres. He noted there would be an on-going cost to keep the land bank balance at 75,000 acres and that additional revenues would go into the general fund and become subject to appropriation. He stressed that the legislation required the balance to be maintained at 75,000 acres but noted the legislation requires the department to do several things that did not always happen. Tape: SFC - 00 #40, Side B 9:50 AM Mr. Loeffler told the Committee that he would provide financial information but warned that the initial appropriation would not be paid back for several years instead of the two years suggested. Co-Chair Torgerson clarified that because of the payment schedule for the loans on the land sales, this was true. Mr. Loeffler added that while the legislation would require the department to offer 75,000 acres, most of that land would not be sold for a couple of years. Until the land was sold, he stressed no money would be earned back. Mr. Loeffler then answered a question by Co-Chair Torgerson saying that the state currently holds approximately $8 million in the land disposal's accounts receivable. He added that approximately $2 million was collected each year. Co-Chair Torgerson commented that while the entire $9.4 million would not be recouped in the first two years, more land would be sold and the accounts receivable balance would increase. Mr. Loeffler concurred but noted that until the land was actually sold, there would be no revenue of any kind. Co-Chair Torgerson understood but stressed that the new land the department would offer for sale under this program would not be of the same poor quality of earlier offerings. DAVID SNEED testified via teleconference from Wrangell commenting on the Land Disposal Advisory Committee and the Land Disposal Advisory Board, that were both mentioned in the committee substitute. He asked if these bodies were the same entity or two separate groups. He also questioned the makeup of membership appointments saying that five seats were too many for the governor to control. He suggested the governor be given appointment authority for three seats and that legislative leadership each be given four seats. Mr. Sneed then relayed his concerns that the department offers no agriculturally suitable state land is offered in Southeast Alaska even though such state-owned land did exist. He extolled the benefits of fresh produce grown within the state. Mr. Sneed next addressed the matter of raising the up front costs to the buyer to prevent default. He stressed that too many people were trying to make ends meet in their daily life to afford large down payments. Otherwise, he said, these people would have already purchased private land. Mr. Sneed stated that many parcels were offered as suitable for agriculture but in actuality were not because of their proximity to the marketplace or growing conditions. He added that he was also concerned that suitable parcels were not offered in every region of the state. Co-Chair Torgerson noted the reference to an "Advisory Board" was a technical error in the committee substitute and would be changed to read "Advisory Committee". Co-Chair Torgerson said he thought the suggestions regarding the appointment of committee members were good comments. However, he defended the existing membership statutes for the Mineral Commission, which also operated in conjunction with the Division of Mining, Land and Water' and appeared to work well. Co-Chair Torgerson next addressed regional jurisdiction saying he hoped the department would offer land statewide. He noted there would be an opportunity for public input as the department developed the five-year plan and the nomination process. He assured that he would review the matter to see if regional land distribution requirements could be put in statute, but qualified that it would be difficult. Co-Chair Torgerson then asked the sponsor's representative why Section 8 was included in the committee substitute offered by the sponsor, 1-LS0071/H. Section 8 stipulated that the commissioner shall annually submit to the governor an appropriation request for funding necessary for survey of land to be offered for disposal, preliminary feasibility studies, engineering design work, right-of-way acquisition, construction of necessary capital improvements and identification of land for future disposal. Mr. Pound replied this was due to the trend of the department in decreasing the amount of land made available as shown in a 1999 Department of Natural Resources report to the legislature. [Copy not provided] The report, he said, shows a reduction from 11,800 acres sold in 1996 to 3,574 acres in 1997, 3,028 acres in 1998, and 1,963 acres in 1993. Therefore, the provision was included to give the then proposed advisory board the latitude to select land for disposal that buyers were interested in purchasing. Co-Chair Torgerson noted the committee substitute changed the board to an advisory committee, which put Section 8 in conflict. Because of the advisory capacity of the committee, he surmised, the director does not have to comply with the will of the committee. He asked the sponsor to review the language. Co-Chair Torgerson announced that a final committee substitute for the bill would be drafted. He ordered the bill HELD in Committee. SENATE BILL NO. 175 "An Act relating to state mining law, to methods of locating mining claims, to the granting of larger mining claims using a legal subdivision based on rectangular survey descriptions, and to mandatory rental payments for prospecting rights." This was the first hearing for this bill in the Senate Finance Committee. JULIE LUCKY, Staff to the Senate Resources Committee, read a statement into the record. She said the intent of the bill was to streamline and make more efficient, Alaska's procedures to locate and process mining claims. She spoke of a backlog of sites waiting to be listed on the state land status plats. Ms. Lucky told the Committee that the Department of Natural Resources had established an electronic format known as Meridian, Township, Range, Section and Claim (MTRSC) that would allow the department to electronically input information regarding claims on the plats. Ms. Lucky said the bill provides an incentive to use the MTRSC format or convert existing claims to the new format. She stated that the bill also clarifies the rental and labor rates for the claims and establishes a rental rate for prospecting sites where there was currently no rental rate. She added the bill would reduce the time allowed for an individual staking a claim or locating a prospecting site, to record a certificate of location from 90 days to 45 days. She stated the bill allows large claims, which would require less fieldwork and less paperwork. Ms. Lucky continued saying the bill would repeal a limitation on the number of sites one could hold in a township, increase the terms from one to two years and make those terms non-extendable. She concluded that the bill removes a requirement that claim lines be marked. Senator Phillips expressed confusion on the fiscal note and the statement that the industry would pay up to $150,000 for the service. BOB LOEFFLER, Director, Division of Mining, Land and Water, Department of Natural Resources stated that the department supported the bill because it would allow the program to move into 21st century using automation and the Global Positioning System (GPS). Senator Phillips and Mr. Loeffler had dialog regarding the contribution of the industry to this service and that half of the money would be deposited to the permanent fund. Senator Phillips requested that future fiscal notes reflect any revenues that go into the permanent fund. Mr. Loeffler stated that this legislation would make operations more efficient to the state and even if the fiscal note were not adopted, he hoped the bill would still pass into law. He told the Committee that the department was not providing the level of service to the mining industry that it could be proud of. This bill, he said, would reduce the processing time to three months. However, because the industry willing to advocate $150,000 of new revenue to the state, he thought it would be beneficial to capture those funds to help decrease the processing time even further to four to six weeks. He believed that time frame would provide a level of service that would better secure land tenure for the industry. Senator Leman noted the $75,000 in the personal services component of the fiscal note, and asked what that money would buy. Mr. Loeffler replied that an additional staff person would be hired. He also detailed the plan to fund currently vacant and unfunded positions. He explained that these were clerk positions with a low pay range that would be charged with inputting data into the electronic system. STEVE BORELL, Executive Director, Alaska Miners Association, Inc. testified via teleconference from Anchorage in support of the legislation. He referred to a letter to the Committee from the Association. [Copy on file] In addition to the letter, he commented that the bill was a result of several years of work between the mining industry and the department. He detailed the efforts of various committees and described the representation of the involved parties. Mr. Borrell stressed that the bill only changes the process for locating claims and does not increase or decrease the rights established by mining claims. He shared that the catalysis behind the industry's interest in making changes was the on-going budget challenge in terms of manpower and time. He believed the bill would simplify the process and reduce errors and paperwork from the miner's standpoint partially due to using GPS and also because of the larger allowed claim size. He stated, "this is a win-win for everyone." Co-Chair Torgerson asked what was different about a prospecting site. Mr. Loeffler explained a prospecting site does not require discovery, which a mining claim requires. For this reason, he noted this bill takes away the ability to extend prospecting sites beyond two years. He said this was because the department wanted the miner to "put their money into the ground to protect their discovery." Co-Chair Torgerson then asked if the leasehold location and mining discovery were the same. Mr. Loeffler explained that the leasehold location is open to mining only after a lease is obtained. Typically, he said the areas subject to leases had additional stipulations because they were near anadromous fish streams or other special circumstances. Mr. Loeffler responded to Co-Chair Torgerson's next query saying that prospecting sites are often staked by major companies who were tying up ground for their exploration program or simply for speculation. He reiterated that the time limitations were included in the committee substitute to ensure the company would develop the sites and therefore generate royalties for the state. Co-Chair Torgerson returned to the fiscal note and the additional personnel, wanting to know if the bill would still accomplish its goals without the additional staff. Mr. Loeffler gave a background of the program saying that in the early 1990's, the state had 3000 mining claims staked each year, and that by 1995, 10,000 claims were staked. While this has resulted in a mining boom, he pointed out that the cost to process the claims has increased. He shared that claims that used to take 3-4 weeks to process were now taking 4-6 months. He warned that the workload would continue to increase. With the inception of this legislation, he predicted the processing time would be reduced to 12 weeks in this fiscal year without the additional funding and to only six weeks if the fiscal note was adopted. He qualified that without the funds, the 12 weeks would increase to 14 weeks and then to 16 weeks, etc. each year. The fully funding program would keep the processing time to 11-12 weeks, according to Mr. Loeffler. Co-Chair Torgerson how many of the 10,000 claims the department processed were on state land. Mr. Loeffler answered all claims. Co-Chair Torgerson next asked how much of the $1 billion generated came from state land. Mr. Loeffler replied that all but the proceeds from the Red Dog mine and the Greens Creek mine. Co-Chair Torgerson pointed out that the mining revenues to the state was only $1.2 million in 1998 and $1.6 in 1999. Mr. Loeffler corrected and explained that in 1999, state and local governments received $13 million from the mining industry not including income tax. Co-Chair Torgerson asked how much of the revenue was from royalties. Mr. Loeffler replied that the state received approximately $4 million for coal royalty and rents, hard rock mining claim rent and mining license taxes, but that only $16,000 in revenues were royalties from hard-rock minerals, such as gold. He stated the reason was because gold prices tumbled and the major producers were not making money. He explained how the royalties were calculated from the net profits. He stated that while Fort Knox was a boom to the Fairbanks economy, the operation did not make much of a profit. He added that in early part of a mine process, there are many of write-offs, which also lower the net profit. He said the net profit calculation method and the exemptions were set by the legislature as a trade-off for new jobs and higher production. He believed this trade-off "was bearing fruit." Mr. Borell interjected to agree with the Ft. Knox example and to note that the site is located on mental health land. He surmised that the Mining Incentive Act as described by Mr. Loeffler had no impact on current revenues but has a large impact on how the state is perceived for new development. He also pointed out that there were few mines in the state, only four mines have more than 100 employees and that other mines were in bankruptcy because of the adverse effects of gold prices. Co-Chair Torgerson expected that the state would realize increased royalties from the mining incentive credits beginning in the next several years. Co-Chair Torgerson stated that his biggest concern was news reports that talk about the healthy mining industry in Alaska but the state's revenue report shows the resources almost given away. Senator Leman asked for an explanation of the claims processing and what could be done to streamline the process. Mr. Loeffler explained that the department has begun to put the status plats on-line, which informs others of areas available for claims. He gave detail of the automation in the platting process and how this bill would assist the department in achieving more automation. Senator Leman thought the process could be set up in "real time" to automatically show the claim status. Mr. Loeffler replied that was the hope and noted that 20 years ago, the department employed 40 people to upkeep the status plats and that there were only three or four people doing the same amount of work. Senator Adams stated that because the fiscal note reflected a commitment of the mining industry, he hoped the fiscal note would be adopted along with the bill. Co-Chair Parnell offered a motion to move from Committee, SB 175, LS0955/G. There was no objection and the bill MOVED FROM COMMITTEE. ADJOURNED Senator Torgerson adjourned the meeting at 10:27 AM. SFC-00 (12) 02/29/00